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4-12 HOW TO SUSTAIN A COMPETITIVE ADVANTAGE 1.Better Expectations of Future Values Buy Resources at a low cost. Nike signing future mega-athletes early in their career (i.e., Michael Jordan) Real estate development- Highway expansion 2. Path Dependence Current alternatives are limited by past decisions. Geographic concentration of the U.S. carpet industry GM’s problems competing with Toyota Prius was decades in the making. Isolating Mechanisms

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4-13 HOW TO SUSTAIN A COMPETITIVE ADVANTAGE (cont’d) 3. Causal Ambiguity Cause of success or failure is not apparent. Why has Apple had such a string of successful products?  Role of Steve Job’s vision?  Unique talents of the Apple design team?  Timing of product introductions? 4. Social Complexity Two or more systems interact creating many possibilities. A group of 3 people has 3 relationships. A group of 5 people has 10 relationships.

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4-14 Taken together, a firm may be able to protect its competitive advantage – even for long periods of time – when its managers have consistently: 1.Better expectations about the future value of resources. 2.Have accumulated a resource advantage that can be imitated only over long periods of time. 3.When the source of their competitive advantage is causally ambiguous or socially complex. SUMMARY

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4-16  The internal activities a firm engages in when transforming inputs into outputs  Each activity adds incremental value and associated costs.  This concept can be applied to any firm – goods or service.  The value chain helps to assess which parts add value and which do not. 4.4 The Value Chain Analysis

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4-18  The value chain is divided into primary and support activities.  Primary activities – Firm activities that add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along the internal value chain  Support activities – Firm activities that add value indirectly, but are necessary to sustain primary activities PRIMARY AND SUPPORT ACTIVITIES

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Implications for the Strategist  Synthesizes internal analysis of the company’s strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T)  SWOT = VRIO framework plus PESTEL plus Porter’s five forces analyses USING SWOT ANALYSIS TO COMBINE EXTERNAL AND INTERNAL ANALYSIS